I'm a co-founder of NorthBridge Energy Partners, LLC., a consulting firm that helps companies connect assets to power grids. I'm also a former Senior VP of Energy Technology Services for Constellation NewEnergy, Inc., and have 20+ years of experience in the energy industry. I've written for the Boston Business Journal, Mass High Tech and several other online industry publications. I have a B.A. from Williams College and a Masters from Tufts University’s Fletcher School.

Sasol's Answer to the Natural Gas Highway: Convert the Fuel

Two weeks ago, Sasol, Ltd (a South African company) announced its intention to invest between $16 and $21 bn in an integrated gas-to-liquids (GTL) and ethane cracker complex in Westlake Louisiana. According to the company press release, the complex is expected to create 1,253 direct jobs with salaries averaging $88,000. This would constitute one of the largest foreign direct investments ever contemplated in the US, and represent one of the top ten economic drivers in Louisiana, and the state is reportedly paying $2bn in tax incentives for the privilege.

The project would yield an estimated 96,000 barrels of diesel per day, with 48,000 bb/day to be delivered in an initial phase and the remainder to follow in a second. The ethane cracker would produce 1.5 million tons annually of ethylene – a basic element used in the chemical industry.

Sasol has been in the synthetic fuels business for over half a century, deriving its initial experience in South Africa when the country was isolated during the apartheid years, and it produced liquid fuels from coal turned to syngas. In 2007, it constructed a large GTL plant to take advantage of Qatar‘s abundant gas resources, and it now has facilities planned or under construction in a number of countries such as Nigeria, Uzbekistan, and Canada.

Sasol’s move to the US is driven by the shale gas boom. As stated on their website: “Along with the de-linking of oil and gas prices, and the abundance of gas at relatively low prices in North America, Sasol is well positioned to convert the low-priced gas into high-value transport fuels.”

The technology to be utilized is the Fischer Tropsch process, the same technology to be used to convert landfill gas to airline fuel for British Airways starting in 2014. The aviation company recently announced it was committing to purchase $500 mn worth over ten years. And while tried and true, the 90-year old technology is also expensive at scale. An article in yesterday’s NY Times highlighted a cost overrun of 3X for Royal Dutch Shell’s $19 bn Pearl plant in Qatar, as well as a joint effort by Exxon Mobil and Conoco Phillips that never got off the ground.

According to the NY Times, the economics only work when there is a significant arbitrage opportunity between the price of natural gas and the price of oil, where those prices are around $4 per thousand cubic feet and $100 for oil, and production capital costs are kept in line. It works at those prices because at $4 per mmBtu, the energy contained in natural gas is priced at the equivalent of $24 per barrel of crude oil, according to the Financial Times.

Sasol’s bet is an interesting variant of the so-called natural gas highway, and it approaches the same holy grail from an entirely different angle: Clean Energy, Shell Oil and others are building out the natural gas highway infrastructure, dotting the landscape with LNG and CNG stations. Meanwhile the major truck engine manufacturers are developing and manufacturing engines to run directly on natural gas.

By contrast, Sasol plans to leave the highway infrastructure and engine conversion to those other parties. They intend to convert gas into diesel for existing engines and infrastructure (don’t raise the bridge, lower the river).

Both approaches involve investments in the billions and rely on a healthy spread between low-priced natural gas and more costly petroleum-derived diesel.

At the same time these investments are being made to exploit the cheap natural gas resource, the chemical industry is ramping up tens of billions of its own investments, counting on affordable gas as a critical feedstock. The LNG crowd is ponying up $5-10bn+ investments in each of several likely huge LNG export plants. Oh, and did I mention the electric power industry?

None of these players at the table are betting small. They are all betting on large supplies of affordable gas. There will likely be big winners – and probably also losers – in the decades to come.

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———-” According to the NY Times, the economics only work when there is a significant arbitrage opportunity between the price of natural gas and the price of oil, where those prices are around $4 per thousand cubic feet and $100 for oil, and production capital costs are kept in line. It works at those prices because at $4 per mmBtu, the energy contained in natural gas is priced at the equivalent of $24 per barrel of crude oil, according to the Financial Times.”———

It does not make sense to convert low cost CH4 to into high cost diesel fuel(cetanes)——–by any standard other than to make a profit. Methane is already a usable fuel as it is—in fact, much cleaner and better for the environment than diesel.

——-”……….Louisiana, and the state is reportedly paying $2bn in tax incentives for the privilege.”—————

And THEN expect a subsidy to turn low cost fuel into high cost fuel that is worse for the environment and public health!!!!!

Natural gas is the future of energy. It is replacing dirty old coal plants, and dangerous expensive nuclear plants. It will fuel cars, vans, buses, locomotives, aircraft, ships, tractors, air conditioners, engines of all kinds. It costs far less. It will help keep us out of more useless wars, where we shed our blood and money. It is used to make many products. It lowers CO2 emissions, over 3,500 natural gas story links on my free blog. An annotated bibliography of live links, updated daily. The worldwide picture of natural gas. ronwagnersrants . blogspot . com

It is really shareful for a South African company to have invested in Qatar, two countries cooperating at least at energy levels. Adam Mayer Chief Marketing Officer Housing Qatar www.housingqatar.com qatar house

There isnt enough food in the world as it is.. There should be no food-fuel used. Work on using the fuels we have and make them cleaner, dont use them for stupid things like plastic packaging on everything and maybe this wouldn’t be problem.